Showing papers in "Journal of Reviews on Global Economics in 2020"

Modification of the Modigliani–Miller Theory for the Case of Advance Payments of Tax on Profit

Abstract: The first serious study (and first quantitative study) of influence of capital structure of the company on its indicators of activities was the work by Nobel Prize Winners Modigliani and Miller Their theory has a lot of limitations One of the most important and seriouse assumptions of the Modigliani – Miller theory is that all financial flows as well as all companies are perpetuity This limitation was lift out by Brusov–Filatova–Orekhova in 2008 (Filatova et al 2008), who have created BFO theory – modern theory of capital cost and capital structure for companies of arbitrary age Despite the fact that the Modigliani–Miller theory is currently a particular case of the general theory of capital cost and capital structure – Brusov–Filatova–Orekhova (BFO) theory – it is still widely used at the West In current paper we discuss one more limitation of Modigliani – Miller theory: a method of tax on profit payments Modigliani – Miller theory accounts these payments as annuity–immediate while in practice these payments are making in advance and thus should be accounted as annuity–due We generalize the Modigliani–Miller theory for the case of advance payments of tax on profit, which is widely used in practice, and show that this leads to some important consequencies, which change seriously all the main statements by Modigliani and Miller These consequencies are as following: WACC starts to depend on debt cost kd, WACC turns out to be lower than in case of classical Modigliani–Miller theory and thus company capitalization becomes higher than in ordinary Modigliani–Miller theoryWe show that dependence of equity cost on leverage level L is still linear, but the tilt angle with respect to L–axis turns out to be smaller: this could lead to modification of the divident policy of the company Correct account of a method of tax on profit payments demonstrates that shortcomings of Modigliani – Miller theory are dipper, than everybody suggested: the underestimation of WACC really turns out to be bigger, as well as overestimation of the capitalization of the company This means that systematic risks arising from the use of modified Modigliani – Miller theory (MMM theory) (which is more correct than "classical' one) in practice are higher than it was suggested by the "classical" version of this theory

Predicting Aggregate and State-Level US House Price Volatility: The Role of Sentiment

Abstract: This paper examines the predictive ability of housing-related sentiment on housing market volatility for 50 states, District of Columbia, and the aggregate US economy, based on quarterly data covering 1975:3 and 2017:3. Given that existing studies have already shown housing sentiment to predict movements in aggregate and state-level housing returns, we use a k -th order causality-in-quantiles test for our purpose, since this methodology allows us to test for predictability for both housing returns and volatility simultaneously. In addition, this test being a data-driven approach accommodates the existing nonlinearity (as detected by formal tests) between volatility and sentiment, besides providing causality over the entire conditional distribution of (returns and) volatility. Our results show that barring 5 states (Connecticut, Georgia, Indiana, Iowa, and Nebraska), housing sentiment is observed to predict volatility barring the extreme ends of the conditional distribution. As far as returns are concerned, except for California, predictability is observed for all of the remaining 51 cases.

An Empirical Investigation of the Portuguese Housing Prices (2004-18)

Abstract: This article presents an integrated macro view of the Portuguese housing market with macroeconomic indicators. Firstly, it compares the housing market and several macroeconomic indicators from 2004 to 2018. Then, the dynamic analysis of the housing prices by different regions in Portugal and its typology included. Also, the article is complemented with the regression analysis to identify the relationship between the house prices and macroeconomic indicators. Results show that the current negative interest rates are increasing the demand for houses and the housing prices. The housing stock in Portugal is mostly fixed but may experience limited growth as the rebuild program and new constructions. GDP and the housing prices have a positive correlation. Houses in Algarve and Lisbon are markedly more expensive than in the interior. From the regression analysis, the unemployment rate is the closest correlated variable.

Financial Crisis Management of Business in Eastern Europe in the Context of the Resilience Increase of National Economic Systems

Abstract: Motivation : The research has noted great problems of post-Soviet Eastern European countries related to resilience securing of national economic systems, where the defining role belongs to financial crises at the micro-level caused by problems in the development and implementation of financial crisis management. The objective of this research is to study the problems of ensuring the operational efficiency of economic entities in Eastern Europe and to develop a set of measures to increase this efficiency. Novelty : The scientific novelty of the article is a developed set of ways to increase the performance of financial crisis management at the enterprises of post-Soviet Eastern European countries. Methodology and Methods : The methods of data study used in this research represent the quantitative analysis of statistic data. The research has also used the forecasting method of time series, which has suggested using regression functions to forecast future values based on data observed earlier. Data and Empirical Analysis : To conduct the research, data on four Eastern European countries, which were a part of the Soviet Union, for 2008-2018 have been taken. Policy Considerations : Post-Soviet Eastern European countries within the resilience securing of their national economic systems require the development and implementation of ways to increase the performance of financial crisis management at enterprises.

Management of Adaptation of Organizational and Economic Mechanisms of Construction to Increasing Impact of Digital Technologies on the National Economy

Abstract: Motivation : We note significant problems of developing countries, including Ukraine, with the adaptation of organizational and economic mechanisms of the construction industry to increase impact of digital technologies on their economic systems and construction sectors. Novelty : The scientific novelty is a set of management activities for the adaptation of organizational and economic mechanisms of Ukrainian construction companies to the development of digital technologies. Methodology and Methods : The research methods used in this study are a quantitative analysis of statistics on the dynamics of world GDP, the global construction industry, the construction industries of developing countries, including Ukraine, the global digital market, digital markets in developing countries, including Ukraine, for ten years using one-dimensional statistical methods (UT) based on random sampling. The paper also uses the correlation and regression analysis, namely the linear regression model, as well as the statistical verification of the obtained model by calculating the pair correlation coefficient, the coefficient of determination and the Chaddock scale in the study of the impact of digital technology development on the Ukrainian construction industry. Data and Empirical Analysis : To conduct the study, data were collected and an empirical analysis was conducted regarding the dynamics of world GDP, the world construction industry, the construction industries of developing countries, including Ukraine, the global digital market, digital markets in developing countries, including Ukraine, in 2009-2018 according to statistics from Knoema, The World Bank, Deloitte, State Statistics Service of Ukraine, UNCTAD, International Data Corporation, Gartner. Policy Considerations : The economy of the country and the construction sector requires development and implementation of a set of management activities to adapt organizational and economic mechanisms of construction in Ukraine to development of digital technologies.

Assessment of Regional Economic Security Level in Innovative Development

Abstract: Analysis of the innovative development of the regional economy is a relevant problem due to its role in ensuring the economic security of the country and achieving priority goals. The subject of the research are the regions of one of Russia’s most dynamically developing macro-regions – the Volga Federal District. It features innovation clusters, a network of modern manufacturing companies, research organizations. At the same time, it developed a significant territorial heterogeneity of the regional space. Therefore, in the course of the study, a typology of the regions was drafted according to a number of indicators, which made it possible to assess the level of their innovative development and identify zones of relative stability, medium and critical state. A forecast of the main indicators of the innovation component was made showing the ability of the regions to overcome the factors preventing the development of the innovation economy. The research results showed that most of the regions have a medium level of economic security in the field of innovation. The Nizhny Novgorod Region and the Republic of Tatarstan are at a high level. The economy of these regions is characterized by a high level of diversification, resilience to instability in the domestic market and external challenges. The Saratov region, the Republic of Mari El and the Orenburg Region are in a low-level zone. A short-term forecast indicates that in general the situation will not change – the regions will increase or decrease the values of the indices within the achieved levels of economic security. A qualitative transition to a new level is possible provided that the problems that hinder the innovative economy in the regions are eliminated.

The Impact of Food Price Changes and Food Insecurity on Economic Welfare: A Case of Selected Southern African Countries

Abstract: Households are tremendously affected by changes in food prices. The extent of the impact depends on the income of households. This study is undertaken to analyse the impact of food price changes on food insecurity and economic welfare in selected southern African countries (Lesotho, Malawi, South Africa, Mozambique and Botswana). The Panel Auto Regressive Distributed Lag (PARDL) model is estimated using time series data from the period of 1980 to 2016. The findings of this study showed that food price changes positively affect economic welfare in the long run for the countries. Households that are net food sellers generate a higher income when prices go up. Therefore, food price changes are a gain for these households, especially producers and net sellers. Furthermore, the study revealed that inflation and net trade affect economic welfare for the countries in the short run. As a policy recommendation, the governments of these countries can subsidise food producers, most especially producers of staple foods that are seasonal; this can stabilize food price changes. As a result, both net sellers and net buyers of food can benefit from food prices. In other words, the benefit of food price can spread across to net buyers, not only net sellers. Also the governments of these countries can use monetary policy such as increase in interest rate to combat inflation.

Food Security and Nutritional Status among Rural Poor: Evaluating the Impact of Rural Livelihood Mission in Odisha, India

Abstract: This paper empirically examines the effect of participation in National Rural Livelihood Mission (NRLM) on the food security of rural poor. In parallel, it also introspects the nutritional profiles of the respondents. Data were collected from 220 respondents (including both beneficiaries and non-beneficiaries) through a structured questionnaire from Sonepur district of Odisha (India). For assessing the nutritional profile, the study uses 24 hour recall and food frequency questionnaire methods to collect the information on food consumption. Then food items were converted into their equivalent calories. A food security index (FSI) was constructed to capture the food security taking the average calories of food consumed by the respondents. The study finds a better food consumption pattern among beneficiaries than the non-beneficiaries. Further, the impact of NRLM is examined using randomised control trial method and finds a positive impact of the programme on the food security. That means, participation in the programme helps the beneficiaries to attain food security. Therefore, participation should be encouraged to mitigate the food insecurity problem.

A Conceptual Approach to Managing Labor Resources in the Maritime Industry

Abstract: Motivation: More than 70% of accidents in the fleet are due to the "human factor" - a wide range of psychological and psychophysiological qualities of the person, which in some way affect the result of its operations. Statistics of major ship accidents in recent decades show that not a single element of the shipping system is aloof from them. That is ship crews, shipowners, charterers, consignees, classification societies and other organizations associated with maritime transportation form a “chain” of risk. The correct combination of human abilities and machine capabilities significantly increases the efficiency of the "person - machine" systems and determines the optimal use by a person of technical means for their intended purpose. Unfortunately, an adequate model that would allow both quantitative and qualitative optimization of the project team, especially in conditions of incomplete determination of the volume of work, today does not exist. In addition, the existing methods do not take into account the specifics of the formation and conditions for the implementation of projects by such teams as the ship's crew, namely the increased level of danger, the inability to make replacements during the voyage, the international composition, the language barrier, etc. In this context, the issue of human resources management as a basic element of achieving the efficiency of project implementation in the field of maritime transport is also urgent, which implies an emphasis on the problem of project-oriented management of crewing and activity of the crew of marine vessels. The issue of clarifying the role, importance and key elements of HRM strategies and policies in the implementation of these projects requires special consideration. The aim of the study is to develop methodological approaches for the forming of quantitative and qualitative composition and effective management of project teams, as a variable component of the project management system of marine vessels. Novelty: Develop methodological approaches for the quantitative and qualitative composition of project teams, as a variable component of the project team on the example of crews of marine vessels. The task of acceptability of the structure, quantitative and qualitative composition of the team was solved. The terminological base of project management was developed by more clearly defining the concepts of “project team” and “project management team”. The approach to the organization of the crewing company recruitment system to work on ships was proposed. Methodology and Methods: In this scientific research to achieve the objective and test the hypotheses suggested in the research paper was used: 1) project teams methodology in project management, in particular, the Project Management Institute Classification (2017) of types of teams in the organizational structure of complex projects and in their management and the taxonomy of SNCB Version 4.1 are designed to provide a comprehensive professional assessment of the level of training of project managers; 2) method for calculating the size of the project team is based on the condition of minimizing its number, which reduces operating costs for the implementation of the project by the Ringelmann effect is known - a formula that provides the ability to quantify and optimize the parameters of the project team; 3) the method of planning of the minimum crew of The International Association of Sea Pilots considering the role of the “human” element in preventing accidents and environmental pollution (the ISM Code and the STCW Convention 78/95 as amended). Data and Empirical Analysis: For the purpose of the study, data were collected and empirical analysis was conducted concerning the analysis of the accident rate of ships and crews for 2009-2019 (causes of accidents: damage to the case and mechanisms; clash; shipwreck and landing; fires and explosions; submergence; contact with the ground; varied; hostilities), that can have a result severe damage or loss of the ship. Policy Considerations: Human factor is the most important aspect that determines the efficiency of shipping development; maintaining of technical and technological processes of the ship puts certain requirements to the quantitative and qualitative composition of the team, deviation from which leads to the occurrence of certain risk events; formation of an effective model of ship's crew manning is the main link in ensuring effective shipping project management.

Modelling the Dynamic Impact of Replanting Subsidy on Tea Production in Sri Lanka: Policy Analysis Using the ARDL Model Approach

Abstract: The tea industry in Sri Lanka plays a vital role in the economy with its direct and indirect contribution to the gross domestic products, employment, and foreign exchange earnings. The successive governments have introduced subsidy schemes for replanting to increase tea production. However, according to the authors' knowledge, there are no comprehensive quantitative studies undertaken to effectively investigate and quantify the effect of tea replanting subsidy scheme on tea production of the various geographic elevations of tea cultivating lands. The significant contribution of this paper is the quantification of the impact of tea replanting subsidy schemes on tea production in the short-run and long-run at different altitudes. This research takes time series data from 1970 to 2018 of three different heights or elevations-high, medium, and low. The Autoregressive Distributed Lag (ARDL) Model examines the short-run and long-run dynamics of the subsidy scheme on tea production. The results reveal that there is a cointegration between tea production and three variables; tea replanting subsidy, tea prices and tea bearing area; in all three elevations. But tea replanting subsidy is not significant in long run for all three elevations, separately. In the short-run analysis, the impact of replanting subsidy is significant only for tea production in low heights with one-year time lag. Since the study reveals that tea replanting subsidy increases, the tea production of low elevation also increases, and almost 60% of the tea extent and 73% of the total tea production gained from low heights, we recommend that the government continue the tea replanting subsidy schemes as it is benefitted by whole tea industry in long run.

Impacts of Company Support and Co-Creation Performance on Tourists’ Satisfaction and Loyalty: An Experiment in The Mekong Delt

Abstract: This study focuses on determining the impacts of company support and co-creation performance on tourists’ satisfaction and how their satisfaction influences customer loyalty in the Mekong Delta. Based on a survey sample of 271 customers, Cronbach's alpha coefficient, exploratory factor analysis (EFA), confirmatory factor analysis (CFA) and structural equation model (SEM) are used for analysis. The results of the study indicated that the assurance most impacted on customers' satisfaction, followed by the responsiveness, empathy, reliability and physical facility. In addition, the customers’ satisfaction is also a significant factor influencing customers’ loyalty.

Crewing of Sea Vessels Taking into Account Project Risks and Technical Condition of Ship Equipment

Abstract: Motivation : One of the main concepts in project management is the concept of “team” in the project, and in project management - the human resources management of the project, which includes the processes of planning, forming and creating a team, its development and support activities, transformation or disbandment of the team. Despite the great attention paid to the formation of project management teams, existing studies do not fully highlight the specifics and features of crew operations. Criteria for the quantitative optimization of the ship's crew should be consistent with the main objectives of the project. Novelty : The research paper proposes an approach that allows optimizing the quantitative composition of the crew of a ship by more accurately assessing the level of project risks and costs associated with the maintenance of ship equipment. The practical application of this approach will optimize the quantitative composition of the ship’s crew, which will both satisfy the needs of managing the technical equipment and minimize the risks and costs of the shipowner. Methodology and Methods : Risk management tools were used to achieve the objective and test the hypotheses suggested in the research, namely: methodology for estimating the net present value of the project; the method of estimating internal rate of return for the project; the method of estimating the return on investment in the project; the method of estimation for the period of return on investment costs in the project; the method of estimating the discounted payback period for the project, as well as the tools of simulation modelling (Monte Carlo simulation method). The method of identification and grouping in the process of classification of project risks in the sphere of marine transportation, methods of systematization, grouping and logical generalization were also applied for systematization of information, drawing conclusions and making scientific suggestions in the research. Policy Considerations : Shipping plays an important role in the trade and tourism industry; human factor is the most important aspect that determines the efficiency of shipping development; maintaining of technical and technological processes of the ship puts certain requirements to the quantitative and qualitative composition of the team, deviation from which leads to the occurrence of certain risk events; formation of an effective model of ship's crew manning is the main link in ensuring effective shipping project management.

The Risk of Nanotechnology: A Challenge to the Insurance Industry

Abstract: Nanotechnology poses a challenge for the modern man. Aside from the many benefits that nanotechnological growth may bring, it exposes our civilization to an increasing number of new risks, creating hazards that are currently difficult to foresee. Nanotechnological developments may have a negative impact on the natural environment; some researchers claim that they may even jeopardize the very existence of humankind. Existence of defined threats opens up space for the functioning of insurance. Answering the need for nanotechnological risk management, the insurance sector should develop a strategy that would offer a reduction of risk aversion (especially among producers) and augment further development of nanotechnology-based production methods. However, this leads to questions whether nanotechnology-related risk is an insurable risk and whether it is technically feasible at this time to draft such an insurance offer. The present publication attempts to answer these questions.

Application of the Modigliani–Miller Theory, Modified for the Case of Advance Payments of Tax on Profit, in Rating Methodologies

Abstract: Recently, we have modified the theory of Nobel Prize winners Modigliani and Miller (MM theory), which is a perpetuity limit case of the general theory of capital cost and capital structure—Brusov–Filatova–Orekhova theory, into two ways: we apply it for rating methodologies needs and later we generalized it for the case of advance payments of tax on profit, which is widely used in practice (MMM theory). In this chapter, we use the modified Modigliani–Miller theory (MMM theory) and apply it for rating methodologies needs. The financial “ratios” (main rating parameters) were introduced into MMM theory. The dependence of the weighted average cost of capital (WACC), which plays the role of discount rate in financial flows discounting in rating methodologies, on coverage and leverage ratios is analyzed. Obtained results will help improve the existing rating methodologies. During the last couple of years, we have suggested a new approach to rating methodology of non-financial issuers, as well for project rating (for long-term projects as well as for projects of arbitrary duration) (Brusov et al. 2018, Ratings of the investment projects of arbitrary durations: new methodology. J Rev Global Econ 8:437–448, 2019, Modification of the Modigliani–Miller theory for the case of advance payments of tax on profit. J Rev Global Econ 9:257–268, 2020). The key factors of a new approach are: (1) the adequate use of discounting of financial flows virtually not used in existing rating methodologies and (2) the incorporation of rating parameters (financial “ratios”) into the modern theory of capital structure (Brusov–Filatova–Orekhova (BFO) theory) and into its perpetuity limit.

Transformation of the Forecast Assessment of Expected Credit Losses in Monitoring and Assessment of Credit Risk in Commercial Banks

Abstract: The article presents the results of the systematization of issues arising in connection with the transformation of the banks forecast assessment of expected credit losses during the monitoring and evaluation of credit risk in commercial banks. Based on the data obtained on the introduction of IFRS 9 "Financial instruments" into the banking sector, it is concluded that in banking practice there is uncertainty regarding the long-term impact of credit risk, and there are significant difficulties with the use of a large amount of additional information, which creates certain difficulties in calculating future credit losses of banks. It is noted that the current use of the model of predictive assessment of expected credit losses of customers in the monitoring and evaluation of credit risk in the bank should take into account the selected collective or individual basis of assessment. The article presents a comprehensive approach to the use of the impairment model of expected losses in banking as a basic tool for modeling expected credit losses in order to form provisions for impairment with the allocation. The modification of this model will depend on the specifics of the bank's credit activities and portfolio, the types of its financial instruments, the sources of available information, as well as the IT systems used. Validation of this model will reduce the expected credit losses, reduce the amount of estimated reserves, as well as improve the efficiency of the Bank as a whole.

Islamic Banks in the Global Economy with Special Reference to in CIS Countries

Abstract: The subject of the article is Islamic banks – a special form of banking business, in which services are provided to customers on an interest-free basis. The article discusses the reasons why Islamic banks emerged and spread, and considers the dynamics and geographical distribution of their assets in the world economy. Particular attention is paid to the theory and practice of Islamic banks performance, their main differences from conventional banks, as well as basic mechanisms of Islamic financing. Problems that make it difficult for Islamic banks to expand in non-Muslim countries have been revealed. The experience of Islamic banks in the post-Soviet space has been analyzed, and the practical experience and success of these financial institutions have been considered.

Stakeholder Engagement and Financial Performance of Firms Listed on the Johannesburg Stock Exchange (JSE)

Abstract: Attaining sustainable development will remain an elusive agenda if there is no effective stakeholder engagement. All stakeholders need to come on board to share and collaborate on environmental sustainability initiatives. This study investigated the relationship between stakeholder engagement and financial performance. The study area of this study was all FTSE/JSE listed firms. The researcher opted for a quantitative research approach and used a case study research design. The longitudinal design was adopted where the researcher collected panel data from 2011-2018. The sample of this study was 32 firms listed on the FTSE/JSE Responsible Investment Index. This resulted in 256 observations for the period under consideration. This study utilised secondary data, which is annual financial statements of firms listed on the JSE. Stakeholder engagement was the independent variable while the financial performance as measured by the Tobin’s Q was the dependent variable. Quantitative content analysis was used to collect data related to stakeholder engagement. Data was analysed using Panel regression analysis model. The Fixed and Random effects models were used to analyse data. The Hausman test was used to evaluate the appropriate model. The findings showed a positive but insignificant relationship between stakeholder engagement and financial performance as measured by Tobin’s Q. This suggested that stakeholder engagement does not predict market valuation of the firm. It was deduced that probably the concerned firms are sending weak signals to key stakeholders regarding their genuine commitment towards environmental sustainability initiatives. Recommendations were made for firms to send strong signals to investors which clearly show that they are genuinely committed towards environmental sustainability initiatives.

Developing the Knowledge Workers Model for Core Competencies Management in Iraqi Higher Education Institutions

Abstract: This paper aims at developing the knowledge workers model for core competencies management via identifying the dimensions of the knowledge workers that are possibly related to the core competencies management. The primary motivations for the current research lies in those gaps represented of scientific and experimental studies in this scope, as well as for the purpose of increasing knowledge in this field. This theoretical research contributes to the development of the knowledge workers model based on its dimensions for core competencies management in Iraqi higher education Institutions. This research used quantitative approach by questionnaire was taken in collecting the data from the research community represented by some Iraqi higher education institutes samples that reached (256) questionnaires, which is about (80%), distributed to individually. The correlation coefficient (Spearman's) and Regression coefficient was relied on by using spss-ver.24. also the Knowledge-based Institutional theory was depended on explaining the results. The empirical analysis of the results was made using (Cronbach's alpha) to test the scales consistency of the validity of the consistency coefficient. The questionnaire was on a high consistency and validity. The results have largely supported the research model referring to the relationship of the knowledge workers have a good correlation and influence relationship in the core competencies management. Hence, this research could be of great use to the researchers, academics, professionals and policies makers.

On Crises in Financial Markets

Abstract: The reasons of the financial markets collapse and methods of their forecasting are investigated in this article. A model based on hypothesis of the quantum nature of the impact of information on financial markets is given. It is shown that in information-saturated volatile financial markets, sharp price jumps are really expected Motivation for this research is inability of traditional approach for explaining sharp price jumps during financial crises. They are unexpected according to the traditional theories. When considering the logarithm of relative price changes over the period y tk = ln( N tk / N tk -1 ) it was found that the statistical characteristics of this random value differ from the characteristics of the normal distribution. The approach, developed in this paper, explaining the possibility of sharp price jumps, seems to be more harmonious than the traditional approach. Novelty of given approach consists in considering a model based on the assumption about the quantum (discontinuous) nature of information impact on financial markets. The process of information transfer is quantum – i. e. the information is transmitted in portions, multiples of a quantum of information. There are discrete information levels. When moving from one level to another, it is necessary to absorb or emit one quantum of information. Thus, the amount of information of a particular level is necessarily a multiple of the quantum of information. Methodology and methods are based on probability and differential equations. Equation with respect to logarithm of increment of prices y = ln( N ( t 0 +D t )/ N ( t 0 )) is thoroughly investigated. The probability density function for each information price level P n ( y ) = Y 2 n ( y ), where Y( y ) is called the wave function of prices. Equation with respect to Y( y ) is thoroughly investigated too. There are many calculations of various probabilities and other characteristics of y (logarithm of prices increment) for different information price level. The hierarchy of information-price levels is autonomous – i.e. each of them has its own separate probability characteristics, different functions of probability density distribution. The normal distribution takes place only when n=0. For all others n=1, 2, 3... the density functions are different from Gaussian.